Global cropping may lead to a sharp drop in cotton prices this year

Cotton prices have risen to their highest level since 140 years ago, but as cotton plantings in Texas and New South Wales hit a record high and supply exceeds demand for the first time since 2007, cotton prices may begin to fall back.

According to Bloomberg's interviews with analysts and traders, the price of cotton will tumble by 51% to a dollar per pound by the end of this year.

Hedge ** has begun to reduce cotton longs, the largest in three years.

The US Department of Agriculture predicts that from August this year, annual cotton production is expected to increase by 11% to 127.5 million bales, while market demand will only increase by 3% to 120 million bales. A pack of 480 pounds of cotton is enough to make 215 pairs of jeans.

The floods between Australia and Pakistan, coupled with China's cold and frostbite cotton fields in the past, the international cotton price on the 7th in New York once climbed to 2.197 US dollars per pound, setting a new high since the American Civil War.

Adidas, the world’s second-largest sportswear company, said this month that the high cotton price has already reached the corporate profits; the world’s largest retailer Wal-Mart’s jeans and Other apparel manufacturing costs are also rising.

Cotton fell 2.2% in early trading on the New York Mercantile Exchange (Nymex) on May 28, at a price of $2.02 per pound.

Since mid-July last year, the price of cotton has soared by 178%. It has gained the top spot in the Stump GSCI index tracking the movement of 24 kinds of raw materials.

The index rose 42% during the same period, reflecting that the S&P 500 index in the US stock market rose by 20%.

Stephenson, the first asset manager, said that farmers may sacrifice corn and soybeans to increase production to cope with the shortage of cotton.